For health care savings, DoD pursues use of ‘incentives’

After trying, and mostly failing, for the past several years to get Congress to increase health care premiums for military retirees, the Defense Department says its current plan for health care incentives is focused more on creating the right incentives for the people its insurance plan covers. And DoD believes it can discourage the most expensive treatment options while still providing top-notch health care.

It’s not as though the Pentagon has completely given up on the idea of increasing out-of-pocket costs for beneficiaries of the TRICARE program. Active duty service members would continue to get health care at no charge, but their family members and retirees would see some fees and co-pays rise under DoD’s 2015 budget proposal.

Dr. Jonathan Woodson, assistant secretary of Defense for health affairs, says the fees the department is proposing this year are, in large part, focused on incentivizing TRICARE beneficiaries to get their care from sources that cost the Pentagon less, such as the military services’ own military treatment facilities and doctors within TRICARE’s own provider network.

“Right now, particularly in the working age retiree population in our TRICARE Prime program, they actually consume more resources than sort of age-matched folks who have a civilian HMO program,” he told the House Appropriations Committee Wednesday. “So we do have substantial data that we need to revise the system to incentivize the right utilization of care, but also provide the access. It’s really important that we bring this in line.”

For instance, under DoD’s proposal, active duty family members would pay nothing for a primary care doctor visit if their provider is at a military treatment facility. Retirees would pay $10. But if they wanted to see a provider outside of the TRICARE network, they would be on the hook for up to 25 percent of the bill. The proposal includes similar cost-sharing breakdowns for other services like specialty care, hospitalization emergency room visits and ambulatory surgery.

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Keeping uniformed health care professionals engaged with patients

While the reasons behind DoD’s push to encourage the use of military treatment facilities are rooted in the department’s belief that they are underutilized and can offer care at lower cost, the military services want to make sure those clinics and hospitals are booked with patients for an unrelated, but different reason, said Vice Adm. Matthew Nathan, the Navy’s surgeon general.

“We could never buy as many providers, nurses, technicians as we can train and cultivate in our own military health care system,” he said. “In order to be able to maintain, train and keep the skills currency to provide the kind of care the American public has come to expect on the battlefield, we have to continue to see and treat that patient population. Without it, our training programs would grow fallow. We need more than just combat trauma personnel. In order to train those and provide those, they have to be integrated into programs that have internal medicine, that have pediatrics, that have OB/GYN.”

Lt. Gen. Thomas Travis, the Air Force surgeon general, said keeping uniformed health care professionals engaged with patients will become even more important once the U.S. withdrawal from Afghanistan is complete. A large majority of his service’s medical providers have had no trouble keeping their skills fresh, because they’ve been regularly engaged overseas.

“War is a hell of a readiness platform, and it’s great motivation to get training and be out there and doing the job,” he said. “As we come home from this war, I think the opportunities to have that exposure are going to be waning. When I go into an MTF these days and ask how many people have deployed, 70 percent of the hands go up. In five years it’s not going to be that many. So the issue is, even as we try to find ways to save money, we don’t need to be chopping the direct care system that much because we have to have the opportunity to practice, not just doctors, but nurses, technicians and the rest.”

Making the system simpler for DoD, beneficiaries

Perhaps the Pentagon’s biggest proposed change to the TRICARE system involves collapsing the three plans it offers today into one. TRICARE Prime, the HMO-like option and TRICARE Standard and Extra, the two fee-for-service plans, would be consolidated into a single hybrid health plan. Beneficiaries could still use providers outside DoD’s own network, but at a much higher out of pocket cost compared to military treatment facilities or in-network providers. Woodson argued the system will be simpler for DoD to administer and easier for beneficiaries to navigate.

“We think the proposal this time around gives the beneficiaries something, as we’re asking them to pay a little bit more, which is a modern approach with fewer encumbrances,” he said. “So the proposal this year removes the requirement for authorization for referrals, which has been a major dissatisfier for folks using the program. So they get something even as we’re asking them to pay a little bit more.”

Military health care costs on the rise

DoD says it desperately needs to reduce its bill for health care during a time of declining budgets.

According to the Congressional Budget Office, the department’s heath care costs rose 130 percent between 2000 and 2012, and they now consume nearly 10 percent of the Pentagon’s entire base budget. The cost increase has something to do with the consequences of a military at war, but also more generous benefits Congress has piled on over the past decade.

“All of the stakeholders have tried to provide a very robust product for the beneficiaries, and they deserve it. But these have added costs,” Woodson said. “TRICARE for Life, for example, represents probably 30 to 33 percent of the increased costs over the early part of the last decade. It’s a robust product, but it carries with it no cost share and no enrollment fee. So what we’re trying to do is not bring in draconian changes that produce a lot of out-of-pocket costs, but modest costs that will help produce a more enduring and efficient program.”

Under the budget proposal, TRICARE for Life, DoD’s supplemental insurance plan for Medicare beneficiaries would begin a phased-in enrollment fee that would, by 2019, amount to 2 percent of an enrollee’s military pension. The fees by that point would be capped at $614 per year for most retirees and $814 for retired admirals and generals.

Woodson said overall, DoD’s proposal would increase the share of costs TRICARE beneficiaries pay, taking them from 9.3 percent of the department’s total tab to 11 percent. When TRICARE was first created in 1996, beneficiaries paid 27 percent.

On DoD focuses on the programs and policies that affect the Defense Department. Each week, Defense Reporter Jared Serbu speaks one-on-one and in depth with the people responsible for managing the inner workings of the federal government's largest department, and those who know it best.